# Free Market Equilibrium 02 Practice Test - 11th Grade - Commerce

Equilibrium:

A.

is a state that can never be achieved in economics

B.

is an important idea for predicting economic changes

C.

is a stable condition

D.

is an unstable condition

#### SOLUTION

Solution : B

Equilibrium is an important idea for predicting economic changes.  Economic equilibrium is defined as the point at which supply equals demand for a product, with the equilibrium price existing where the hypothetical supply and demand curves intersect.

A rise in supply and demand in equal proportion will result in:

A.

Increase in equilibrium price and decrease in equilibrium quantity

B.

Decrease in equilibrium price and increase in equilibrium quantity

C.

No change in equilibrium price and increase in equilibrium quantity

D.

Increase in equilibrium price and no change in equilibrium quantity

#### SOLUTION

Solution : C

A rise in supply and demand in equal proportion will result in no change in equilibrium price and increase in equilibrium quantity, becuase the market forces will balance themselves.

The market demand curve shows

A.

the effect on market supply of a change in the demand for a good or service.

B.

the quantity of a good that consumers would like to purchase at different prices.

C.

the marginal cost of producing and selling different quantities of a good.

D.

the effect of advertising expenditures on the market price of a good.

#### SOLUTION

Solution : B

The market demand curve shows the quantity of a good that consumers would like to purchase at different prices.

The market supply curve shows

A.

the effect on market demand of a change in the supply of a good or service

B.

the quantity of a good that firms would offer for sale at different prices

C.

the quantity of a good that consumers would be willing to buy at different prices

D.

All of the above are correct

#### SOLUTION

Solution : B

The market supply curve shows the quantity of a good that firms would offer for sale at different prices.

Market equilibrium refers to a situation in which market price

A.

is high enough to allow firms to earn a fair profit

B.

is low enough for consumers to buy all that they want

C.

is at a level where there is neither a shortage nor a surplus

D.

is just above the intersection of the market supply and demand curves

#### SOLUTION

Solution : C

Market equilibrium refers to a situation in which market price is at a level where there is neither a shortage nor a surplus.

If the price of a good increases while the quantity of the good exchanged on markets increases, then the most likely explanation is that there has been

A.

an increase in demand

B.

a decrease in demand

C.

an increase in supply

D.

a decrease in supply

#### SOLUTION

Solution : A

If the price of a good increases while the quantity of the good exchanged on markets increases, then the most likely explanation is that there has been an increase in demand.

If the price of a good decreases while the quantity of the good exchanged on markets increases, then the most likely explanation is that there has been

A.

an increase in demand

B.

a decrease in demand

C.

an increase in supply

D.

a decrease in supply

#### SOLUTION

Solution : C

If the price of a good decreases while the quantity of the good exchanged on markets increases, then the most likely explanation is that there has been an increase in supply.

If the price of a good increases while the quantity of the good exchanged on markets decreases, then the most likely explanation is that there has been

A.

an increase in demand

B.

a decrease in demand

C.

an increase in supply

D.

a decrease in supply

#### SOLUTION

Solution : D

If the price of a good increases while the quantity of the good exchanged on markets decreases, then the most likely explanation is that there has been a decrease in supply.

An increase in the demand for a good will cause

A.

an increase in equilibrium price and quantity.

B.

a decrease in equilibrium price and quantity

C.

an increase in equilibrium price and a decrease in equilibrium quantity

D.

a decrease in equilibrium price and an increase in equilibrium quantity.

#### SOLUTION

Solution : A

An increase in the demand for a good will cause an increase in equilibrium price and quantity.

In which instance will both the equilibrium price and quantity rise?

A.

When demand and supply increase, but the rise in demand exceeds the rise in supply

B.

When demand and supply increase, but the rise in supply exceeds the rise in demand

C.

When demand and supply decline, but decline in the demand exceeds the decline in supply

D.

When demand and supply decline, but the decline in supply exceeds decline in the demand

#### SOLUTION

Solution : A

When demand and supply increase, but the rise in demand exceeds the rise in supply.